Janet Yellen, chair of the Board of Governors of the Federal Reserve System (2014-2018) speaks at the 19th World Knowledge Forum in Seoul on Friday.

Although debatable and uncertain on what can be defined “neutral” monetary policy of being neither accommodative nor restrictive, the U.S. rates would have to be raised at least three to four times to near the “neutral” level, said Janet Yellen, chair of the Board of Governors of the Federal Reserve System (2014-2018) in Seoul.

“We are still long away from where neutral is. It would take three to four increases to get to that zone,” she told a discussion session on Friday at the 19th World Knowledge Forum hosted by Maeil Business Newspaper in Seoul.

She echoed the words of her successor Jerome Powell who claimed interest rates were still accommodative and should be moving towards the neutral level. “We may go past neutral but we are a long way from neutral at this point,” he had said soon after administering the third hike this year on Sept. 26 to place the Fed fund target range at 2.0-2.25 percent and indicating another increase before this year ends.

Three to four increases would put the upper target of the U.S. rate at 3.25 percent. Given the low productivity growth around the world, graying population, and preference towards safer assets, the U.S. rates won’t go as high as 5 to 6 percent levels, according to Yellen.

The Fed is “certainly not crazy,” said its former chief coming in to defend Powell who replaced her earlier in the year and lately came under fire by President Donald Trump for “going crazy” with the rate increase.

Regardless of what the president feels, the market has confidence in Powell and the FOMC to do the “right thing” for the economy.

She instead had pointed words for the Trump administration’s trade protectionism that has escalated risks for the global economy and added uncertainty on growth prospects.

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Janet Yellen speaks to Maeil Business Newspaper in an exclusive interview in Seoul on Friday.

“I agree with the International Monetary Fund assessment that this (U.S. protectionism) is a risk to global growth and a risk to the U.S. economy as well,” Yellen told Maeil Business Newspaper in a separate exclusive interview on Friday.

She predicted tensions with China “would escalate more going forward…which will have adverse consequences on the U.S. economy and more significant adverse effect on the Chinese economy.”

What can pose a bigger risk to the Korean economy than the vulnerabilities in the emerging category is the potential slowdown in the Chinese economy as the result of the ongoing trade war with the U.S., she said.

Korea, an open economy and a major intermediary good exporter to China, is exposed to greater risk if growth prospects of China were to diminish. “It clearly has potential to do significant damage,” she said.

She did not see the monetary tightening cycle in the U.S. would bring about as big a damage on the global economy as in 1994-1995 that eventually led up to the Asian liquidity crisis in 1997 and sent Korea to seek an international bailout.

Unlike then, Korea and many others now adopt flexible exchange rate and are careful about banking and currency mismatches.

She also disagreed with the notion of using monetary (rate) policy as a tool to address financial risk including household debt and advised fiscal and other options to solve real estate and debt issues as the monetary policy’s primary role is to control overall inflation.

She pointed to the Swedish case where monetary policy was used to bring down household debt, which resulted in deflation and more adverse effect on households.

Although many studies showed there was “absolutely no impact” on employment from minimum wage increases, there is a greater likelihood that “employment impact will be negative or larger when minimum wage comes closer to the median wage,” she said.

“The higher up the minimum wage goes relative to the distribution in the wage of the economy, the higher will be the chance of it having a negative impact,” she added.

Minimum wage increases by double digits this year and planned for next year in Korea have significantly cut jobs and damped sentiment to slow the Korean economy.